Asset Finance

There are two main forms of asset finance delivery, by direct Asset Finance or vendor Asset Finance.

Direct Asset Finance

This method of asset based financing comes through financial institutions like specialist financiers, brokering services and banks. The finance is arranged separately from the manufacturer or vendor of the asset.

Vendor Asset Finance

This type occurs when the manufacturer or vendor of an asset offers a finance option for buying their products as an alternative to purchasing the asset with a one-off payment. This is often a convenient way to sort out finance if you already have an established business relationship with the manufacturer.

Budgeting your monthly payments with asset based financing

Asset Financing solutions are very useful when dealing with budgeting. It means that your firm can budget for the monthly payments rather than a single lump sum payment. You can gain the benefits of using the asset before it has been paid for in full.

Asset Finance also comes with some tax benefits. Generally operating lease payments are fully tax deductible which means that they can be made with pre-tax money. If you purchase an asset with a lump sum payment you have to use taxed money.

What is leasing?

If you pay for an asset using cash it can cause a reduction in your working capital. An alternative method could be to use Asset Finance leasing; this enables you to use an asset without making a substantial capital expense. If you lease an asset then you pay the lessor, who continues to own it, regular payments for the term of the contract.

You can lease a wide range of equipment for use in many different sectors of the economy. There are some industries Where leasing is quite common; these include transport, manufacturing and construction. Equipment leasing agreements are made to be flexible, they can often be adapted to meet the specific needs of your company.

Types of leasing - The two main forms of leasing

Direct leasing – When using this form of leasing you locate the asset you wish to obtain and give the details to a leasing company. They can buy the asset from the supplier or the previous owner and rent it out to your company.
Sale and leaseback – This type can also be referred to as purchase leaseback. With this method you sell an asset that you already own to the leasing company in order to free up capital and they will then rent it back to your firm.

Make the right choice in equipment leasing

Leasing expensive equipment can seem beneficial to begin with but you should make sure that it is the most suitable choice for the current state of your business. Leasing can have a significant impact on your financial situation, this includes your level of cash flow and the rate of tax paid. Seeking professional advice could help avoid any problems and enable you to receive the benefits of leasing in full.

What is asset refinancing?

This is an under used area of Asset Finance but asset refinance can be a really effective financial method of commercial and office equipment leasing which can raise your cash flow levels.

If you already own valuable assets such as property, technology or machinery you can sell them to a leasing company who will give you the current value of the asset. You can carry on using this asset as before, you just have to send the lessor monthly payments.

Asset refinancing can make a company stronger, no matter to which sector it belongs to, by allowing it to react effectively to changes in market conditions. It can also help to release capital enabling a firm to take advantage of new business opportunities.

Commercial and office equipment leasing: low cost way to raise funds

When commercial and office equipment leasing through asset refinancing occurs a contract is formed between the asset holding company and the lessor. Repayments are made over a fixed period of time at monthly or quarterly intervals, the rate of interest paid on these contracts also tends to be fixed. The specific terms of each contract will differ, in some cases it may be possible to negotiate non-standard terms with a lessor. The majority of asset refinancing companies do try to be accommodating because it is a highly competitive market.

The rate of interest attached to asset refinancing arrangements means that you will end up paying more than the original price of the asset over the life of the contract. It is a comparatively low cost method of raising funds though and the benefits of asset refinancing tend to outweigh the extra costs incurred.